Baton Rouge Hospital Provides Louisiana Payday Loan Alternative
By Lindsay Frankel
A Baton Rouge hospital has stepped up to combat Louisiana payday loans by providing a loan alternative to local residents. Our Lady of the Lake Regional Medical Center is working in conjunction with a nonprofit organization, a local Catholic charity, and a financial institution to issue micro-loans to members of the community.
The program, known as The Faith Fund, launched in 2018 and has since issued 210 loans to borrowers. The loans, which totalled $253,779, are estimated to save borrowers about $760,000 in interest and fees.
A payday loan is a short-term loan intended to be repaid out of the borrower’s subsequent paycheck, but exorbitant interest rates and fees often make it impossible for borrowers to pay off a payday loan while keeping up with necessary expenses. In fact, the Consumer Financial Protection Bureau found that 80 percent of payday loans get rolled over or renewed. And because of lax regulations in the state, payday loans in Louisiana carry an average APR of 435 percent, according to the most recent data from Pew Charitable Trusts.
Interest rates can be even higher in Baton Rouge, reaching 1,043 percent APR on a $50 loan, one of the highest rates in the country. As a result of these rates, workers in Louisiana lose more than $240 million each year paying fees to payday lenders, according to the Louisiana Budget Project.
What’s more, payday lenders are known to target vulnerable populations, and there’s a high concentration of payday loan storefronts in low-income and African American communities of Baton Rouge.
The Faith Fund plans to reach more Louisiana residents by expanding the program and providing “lunch and learns” to employees of local businesses, said James Hunter, executive director of The Faith Fund. It’s all part of an effort to educate the community about predatory lending and debt reduction in an attempt to narrow the wealth gap in Baton Rouge.
It’s logical for a healthcare institution to address the payday lending problem, since widening disparities in wealth impact healthcare outcomes. A report from the Government Accountability Office showed that differences in income created disparities in longevity. Wealthy Americans are more likely to live longer than their low-income peers.
The Faith Fund is a great example of how cities can utilize the resources of local institutions to address disparities in the community. Similar approaches can be applied in cities and rural areas across the nation.
“We need to create new institutions like this that are designed and programmed to put community health and well-being above the drive for profit — and have a real chance at increasing the survival rate for poor Americans,” wrote Lauren Worth of the Healthcare Engagement Team at Democracy Collaborative.